The Burmese pro-democracy leader Aung San Suu Kyi has been released from house arrest, according to reports from Rangoon.

Three official cars drove past the crowds of supporters and into the home of the Nobel peace laureate, where she has been confined for the past seven years. In total Aung Sung Suu Kyi has spent 15 of the past 21 years under house arrest because of her outspoken opposition to the military junta, which has ruled Burma for 48 years.

The crowds waiting outside the lakeside compound cheered as news filtered out that release papers had been read to the 65-year-old. Police began moving the barricades from around the house at around 4.30pm (10.30am GMT).

Aung San Suu Kyi, whose latest term of detention was due to expire today, could have refused to sign the order if the conditions had been too harsh, said members of her party, the National League for Democracy (NLD).

The ruling generals gave no formal indication of what was happening. It had been unclear if they would respect the expiry of the detention order due to fears she would revive her fight against the dictatorship in one of the world's most oppressive nations.

Close to 1,000 people, among them many journalists, chanted "Release Aung San Suu Kyi" and "Long live Aung San Suu Kyi", some wearing T-shirts emblazoned with messages pledging to stand with her. They were watched by about 30 riot police armed with guns and teargas.

Nyan Win, a lawyer for the opposition leader, said she would meet NLD leaders before deciding what to do next.

Analysts said it was likely only the paramount leader, Senior General Than Shwe, and his closest allies knew the next steps for her.

With the 7 November election, the first in 20 years, out of the way and won by an army-backed party, the generals could seek some international legitimacy with her release. The charismatic daughter of the slain hero of Burma's campaign for independence from Britain has a huge international following.

Her release could be the first step towards a review of western sanctions on the resource-rich country, the largest in mainland south-east Asia and labelled by human rights groups as one of the world's most corrupt and oppressive. It could also divert attention from an election widely dismissed as a sham to cement military power under a facade of democracy.

"The regime needs to create some breathing space urgently," said a retired Burmese academic, who asked not to be identified. "Her release will help improve an image tarnished by electoral fraud."